Housing finance falls to 21-month low

Evidence has emerged that the investor lending crackdown may be working, with home loan approvals at their lowest level since August 2013.

Australians made $31.3 billion of housing finance commitments in May, according to new data from the Australian Bureau of Statistics.

That marked a 13.3 per cent increase on the previous year – but also a 4.4 per cent decrease on the previous month.

The owner-occupied share of those commitments reached $18.1 billion, which was up 8.2 per cent annually but down 5.3 per cent monthly.

Investors’ share reached $13.0 billion after jumping 21.2 per cent over the year but falling 3.2 per cent over the month.

During May, the big four banks and a range of other lenders made it harder for investors to access finance, while some simultaneously tightened their owner-occupied lending.

That may have contributed to owner-occupier housing finance commitments falling to a 21-month low of 50,366 – down 3.3 per cent on the year and down 6.1 per cent on the month.

Established homes represented 41,991 of that total, which marked a 2.8 per cent annual decline and 6.2 per cent monthly decline.

New homes represented 2,766 of the total – up 1.9 per cent over the year and 0.3 per cent over the quarter.

There were also 5,609 commitments for new home builds, which was down 9.3 per cent over the year and 8.3 per cent over the month.

Housing Industry Association economist Diwa Hopkins said the May decline occurred despite interest rates falling to a record-low two per cent in that month.

“It remains to be seen whether this latest cut will generate further momentum in lending for dwelling construction,” she said.

“Currently, the profile of dwelling-construction lending suggests that actual new home building activity might start to moderate over the short to medium term.”

Mortgage Choice chief executive John Flavell said the problems in China and Greece may put off some potential buyers.

“Economic uncertainty abroad may dampen the spirits of Australian property buyers, not to mention potential international investors,” he said.

“That said, while demand may weaken further over the coming months, it is important to note that by historical standards demand is still incredibly high and the value of home loans written each month is still very strong.”